Basic Principles Day 3 Supply and Demand Civics Mr. Hensley SRMHS

Chapter 3 Table 3.1

Chapter 3 Figure 3.1

The Law of Demand: Why is the Demand Curve Downward-sloping? The Income Effect as the price rises given your income you can only afford to buy less as the price falls given your income you can afford to buy more The Substitution Effect As the price rises, buyers switch to relatively cheaper goods As the price falls, buyers switch away from other, relatively more expensive goods

Chapter 3 Table 3.2

Chapter 3 Figure 3.2

Determinants of Demand (5) Tastes & Preferences Consumer Income Normal v. Inferior Goods Number of Consumers Consumer Expectations (of future price changes or availability) Prices of Related Goods & Services Substitutes Complements Mnemonic: TINER

Chapter 3 Figure 3.3

Chapter 3 Table 3.4

Chapter 3 Table 3.5

Chapter 3 Figure 3.4

The Law of Supply: Why is the Supply Curve Upward-sloping? Marginal costs of production rise as more is produced When producers make more output, they need more inputs Land Labor Capital Entrepreneurship Producers bid up the price of these inputs by using more and must pass on the higher cost to consumers

Determinants of Supply (6) Production Technology Input Prices (Factor or Resource Prices) Number of Suppliers Taxes and/or Subsidies Producer Expectations Prices of Related Goods & Services Substitutes in Production/Switching Outputs Complements in Production/Byproducts Mnemonic: TINTER

Chapter 3 Table 3.7

Chapter 3 Figure 3.5

Chapter 3 Figure 3.7 A Price Ceiling

Chapter 3 Figure 3.8 A Price Floor

Supply and Demand Determinants: Relationships Determinants of Demand Tastes and Preferences Income Number of Consumers Consumer Expectations Prices of Related Goods and Services Determinants of Supply Technology Input Costs Number of Producers Producer Expectations Prices of Related Goods and Services Taxes & Subsidies